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OMV shrinks refining as Shell commits to the sector

Hydrocarbon Engineering,

OMV AG, the largest oil company in central Europe, has announced plans to sell € 1 billion of refining and marketing assets by 2014 in order to increases its focus on exploration and production.

The sale will be a ‘combination’ of different assets, including refining units and filling stations, according to chief executive officer Gerhard Roiss.

Roiss went on, stating that the Vienna-based company may ‘leave some countries that we are in’, although no specific locations were named. The company plans to concentrate on businesses ‘where we can supply out of our refineries’.

The move will shift focus to exploration and production operations, which are expected to account for 55% of its total assets by 2021, up from 35% in 2010. Refining and marketing will fall to 25% from 53%. Some international oil companies including Chevron Corp. and Royal Dutch Shell Plc have already sold unprofitable European refineries.

The move comes against a backdrop of similar action: several integrated oil companies have recently concluded they would be better off split into separate parts.

ConocoPhillips said in July that it is dividing itself into two publicly traded companies, one for each side of the business. That follows a similar move Marathon Oil Corp. made this summer when it created publicly traded Marathon Petroleum Corp. to run its refineries. Meanwhile, Murphy Oil Corp. has sold all of its refineries except for one in Wales, which it is actively shopping.

Royal Dutch Shell, however, appear to be going against the grain somewhat. The company’s chief executive has stated that Shell has no plans to shed refineries, and that they ‘will remain an integrated oil company’.

In an interview with the Wall Street Journal, Peter Voser said that Shell values its refineries as part of its overall business. Owning refineries, he said, should give the company an advantage in developing its Canadian oilsands, the thick crude that requires intense refining, and in its efforts to turn North America's abundant natural gas into fuel for vehicles.

If a company is only involved in one part of the oil and gas business, he said, ‘you have the risk that others will optimise the value chain.’

Mr. Voser said that having refining capabilities also gives Shell an advantage when courting government owned oil companies, which typically have access to vast reserves but little capability to get oil and gas out of the ground or to turn them into marketable products.

‘For us to be the right partner to national oil companies, we have to be integrated’, he said.



In other Shell news, the company has reported unusual flaring at its Pernis, Rotterdam refinery in the Netherlands. The flare occurred on 20 September and was clean, causing no environmental damage. The refinery is Europe’s largest, with a processing capacity of 412 000 bpd.

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